• Author / Uploaded
• att_doz86

Citation preview

Problems in Bureaucratic Supply •

Public agency don’t need pass a market test to survives

•

Welfare depend

greatly upon

the

diligence

and motivation

of

the

representative •

The firms consisting of hierarchical relationships between principals and agents rather than sets of contracts exactly specify the services to be provided

•

The monitoring problem in public agency is Principal – agency

Agency Loss Principal – agent problem: -

asymmetric of information (within and between agencies)

-

do not have same interest

-

costly to monitor the behavior

Agency loss: the sum of the costs of the undesirable behavior of agents and of the activity undertaken to control it, for example; discretionary budget, spending at faster rate towards the end of fiscal year, adding personnel increased spending in travel and supplies and so on. Three factor agency loss: 1. Difficulty Valuing Output •

Pricing of public good and services

•

Estimation of social costs and benefits is difficult, so it is difficult to determine the optimal sizes of public agencies

•

political considerations often determine the context and amount of public good and services

•

distribution goals often considered to reach vertical and horizontal equity

•

multiple goal and conflicting goals

2. Limited competition •

public agencies can survive even when they operate inefficiently

•

inappropriate and inconsistent incentives for innovation (operating through political ambition of the agency heads)

•

disadvantages faced by innovators in government:

•

no competition to imitate

•

cannot borrow from banks to cover start-up costs

•

civil service rules make it difficult to secure specialized expertise

3. Inflexibility caused by civil service protection •

the high – ranking officials serve at the pleasure of ruling political power

•

continuity and nonpartisanship, must be purchased at the expense of a certain amount of inflexibility in agency staffing

•

a civil service system that makes difficult to fire employees must also take great care in hiring them if quality to be maintained

Problems in decentralization Why do we want decentralized government? It is because of: -

“check and balance” prevent abuse of power less damaging and more correctable

-

reduce the opportunity for tyranny by the majority

-

matching local preferences to local public goods and services, more efficient

-

bring citizens closer to public decision (increased chances for voicing their preferences)

-

- vote with their feet possible

Any problems, then it led to limits effectiveness of public policies includes: -

diffused authority: implementation problems

-

fiscal externalities: inequitable distribution of local public goods

Diffuse Authority Unequal distribution of necessary elements may create compliance problems due to: -

limited resources

-

limited competence

-

different ideas about the policy goals

Diffuse authority has also created bargaining power by withholding their contributions (not complying with the central directives)

Problem of inter-organizational cooperation: -

problem of monitoring compliance

-

difficulty in securing voluntary compliance

-

cannot guarantee the resources are spent at the right place

Fiscal externalities -

Matching local demands with local public goods and services

-

Voting with their feet to match their preferences with the provision of public goods

-

The relationship between property tax and public services leads to “zoning” policy that limits mobility: 

positive fiscal externalities from those who pay above – average tax shares and place below – average demands



negative fiscal externalities from those who pay below – average tax shares and place above – average demands

-

Competition for businesses and wealthy residents may decrease the social benefit

-

Poses difficulty in estimating the policy effects in terms of sublevel government and the society as a whole

Conclusion Public policies analysis is very important because it is help to correct incomplete in the political system, they can give some advice, and correcting an x- inefficiency and lack of in public policy. However it is depending on the authorities' decisions.